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tv   Fox News Reporting  FOX News  August 11, 2012 1:00am-2:00am EDT

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with president obama, going back and forth with spending. talk about that for just a moment. >> think about this. paul ryan, as a member of the house, a relatively young man, toe to toe with the president of the united states. the president set ryan ups a foil. he said, i'm willing to talk to reasonable republicans, not unreasonable republicans, like paul ryan. and ryan held his feet to the fire and told the president, if you want to talk, let's talk about this. a key moment in all of this is that ryan went on the bowls-simpson council that the president put together and ryan walked away because they wouldn't it deal with entitlement reform in a way he thought was necessary. that was a big moment. when ryan walked on that and wouldn't go along with the deal, even when many republicans were willing to do so, a very important thing happened. he won the respect of many conservative who is didn't
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know -- were sure he was on their team. when he did that, that made his bone inside the conservative movement. >> chris, as we talked, the associated press is quoting a republican official saying that mitt romney has indeed chosen paul ryan, this is off the associated press right now. does that surprise you? >> well, you know, it would have surprised me if mitt romney were up in the polls twould have been a surprise. but with mitt romney trailing and needing to change the discussion, i have to tell you, making an unconventional or going against the grain and picking somebody who is going to make this discussion -- because now what romney is saying, if that associated press report is saying is true, romney is saying, let us have an ideological debate. we have been talking about my tax returns and everything else. let's talk about something big. paul ryan has a big plan for dealing with the federal government and spending and taxation.
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let's talk about that. so it's trying to turn the tables away from personal attacks on romney, which we have been seeing since april, to a discussion of big ideas. >> right. we are getting more, chris, as we talk from the associated press right now. i want to read some of this. republican presidential candidate mitt romney has picked wisconsin congressman, paul ryan to be his runningmate. this is from a republican with knowledge of the situation, telling the associated press that romney has chosen ryan. this is coming from the associated press, the republicans spoke on condition of anonymity because this person was not authorized to disclose that decision. chris, this is a decision that has been... they held their cards, certainly close to the chest as most candidates do. romney will be making this announcement, 8:45 a.m. in norfolk, virginia, on the uss wisconsin, which we had been talking about, indicated paul ryan, but the second quartered press is saying that paul ryan
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is the choice, the runningmate choice for mitt romney. go ahead. >> if that unidentified republican is true, we have seen fake ads, this would be the grandest since the normandy invasion, but you have to hold out -- you have to keep one eyebrow up. but this is -- this is -- we knew this was going to be a big and important election. if this is true, this makes a bigger and more important election because it makes the chasm as clear as possible when have you really now mitt romney owning small government, fiscal conservatives. he is embracing it fully. he is doing that. and have you president obama, who has been talking about stimulus. he's been talking about what he calls investment and the need to raise taxes on top earners, this is mitt romney putting forward in one person, saying, i have the completely opposite view.
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now youville a very stark choice with ryan, if he's the man for the undecided, remaining undecided votes. >> so suspense has been building since this. you said this would be suspenseful if this was the biggest fake of all time. it doesn't seem to be going that way, certainly seems like -- >> no. but -- and think about this. something unusual that team romney did here and should be to their credit. normally what happens is, it dribbles out and it drabbles out. now this is dribbling and drabbling out tonight. but they did it unconventionally f. wasn't supposed to be saturday before the election. everybody knew it was going to be after the olympics. we're done. it was supposed to be on a week day on the news cycle. they decided to do it at a time when no one was watching and the political journalists in washington, like me, were at home with their feet kicked up. and boom! there is no way they are going
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to do it on a saturday, for goodness sake. here, they are doing it on saturday. they stole the march on the democrats and on the political press here. if it's ryan, they will get the buzz going. will it maintain itself and how will ryan weather in the two weeks before the convention? >> stay with us. we have a lot to talk about. but i want to get to juan williams on the phone, juan, are you there? >> reporter: i'm right here. >> what are you hearing? >> reporter: i'm hearing what you and chris have been talking b. clearly, over the last week, that's been the momentum that is building from not only the weekly starn and the wall street journal. and if you have been reading the blogs, it's pretty clear. republican frustration with romney as the nominee has been growing. and the sense i have been getting is they are looking for someone who can demonstrate some scpagz bring freshness, a sense of the future of the republican
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party. one element i would highlight is that paul rye abis a young man and looks like the future of the republican party. and plus, very well into the passion and energy that you see coming from the young people in the congress right now. often identified as the tea party folks, the 60-plus who came in in the 2010 mid-term. paul ryan's budget has been approved by those people. they see him as one of their own. i think the energy, the notion of exciting the republican base, the conservative base worries about romney as a flip-flopper, feeling he has lacked in terms of fight, when attacked by the obama camp, i think they will be very pleased if paul ryan is the runningmate tomorrow morning. >> right. paul ryan, 42 years old, brings a lot of youth to the ticket, if the associated press reports is correct that paul ryan is the
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presidential runningmate choice. you can see video of these two gentlemen. there is a lot of energy on that stage. >> reporter: i think that's right. and have you to keep in mind that it's going to in so many ways say to the political establishment that this is not safe. you guys were talking -- just a few momes ago about the fact that this is going to be viewed as a risky choice. it is a risky choice. it opens the door wide to democrats, sharply criticizing the republican ticket as: indifferent to the social safety net in the country because the ryan budget, as you know, does not list exactly how it would balance itself out but does go after changes in social security, changes in medicare. these are things that they are going to have to explain, rationalize. tell put them on the defense. that's why it's risky.
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the other element that makes it risky is at the moment, mitt romney is trailing badly in wisconsin. the thought was that wisconsin was going to be a battleground state. >> juan, i upon to talk to you real quick about that. i need to interrupt you because we are heading up to a hard break, talking with juan williams about mitt romney's choice for a runningmate. we'll be right back. this is the plan for back to school.
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welcome back. as you have seen, cities with big dreams and big bills have come here to wall street for the cash to finance them. but even more towns are going broke not by issuing bonds is but by issuing promises to public employee unions. that story has a new york angle, too. fox business network's lou dobbs explains. >> but it is a good natured sort of labor battle. it was in 1935 that president franklin roosevelt made it
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easier for workers in the private sector to create unions. when signed the wagner act he see he meanted and deepened political ties between organized labor on the democratic party. >> it doesn't pool enthusiasm for picketing. >> even fdr didn't think public sector unions made any sense. >> collective bar gaining is different for public workers because their boss is really on their side. >> lies extensively on the roots of america's economic problems. >> they don't want to pay the union mihms too much because it comes out of their own pockets at ford, but that is not true of the government. >> strikes by public employees would be quote the unthinkable and intolerable. but it was within a couple of decades that democratic heirs decided the political upside of
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public sector unions was worth the risk. the euro caucuse eureka momentd right here in new york city. municipal workers granted the right to bargain collectively. three years later those public unions organize today's reelect him. wagner's unexpectedly strong showing caught the attention of another democrat worried about reelection. president john f. kennedy. >> he sees how this carried wagner to victory and issues an executive order allowing for the unionization of federal employees. state and local governments picked this up as a cue and you have the rapid growth from there on of public sector unions across the country. >> historian fred siegel of the manhattan institute says the new unions almost invariably worked to elect democrats.
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>> pay increases and pension increases and healthcare increases. meanwhile the union takes some of the money it gets from the city and invests in local elections. so it continues to elect people who will give the unions what it wants. >> and they also became a political force unto themselves. >> you can't act without their cooperation. >> that is because when elected officials didn't cooperate the public sector unions that fdr warned about declared those unthinkable strikes. the most memorable case, the summer of 1975 when new york was close to bankruptcy. sanitation workers let garbage pile up in the streets while laid off police marched and shut down the brook le brookly. public employee unions demonstrated nationally when they helped senator ted kennedy challenge to a sitting democratic president they didn't like, jimmy cart.
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the public sector unions become the get out the vote machine that the old democratic party machine once was. >> carter was renominated but lost to ronald reagan who had the is support of at least one public is sector union, the air traffic controllers. that wouldn't last. months later the controllers rejected a government contract offer they went on strike. but that was not allowed under federal law and president regan fired them all. >> but we cannot compare are labor management relations in the private sector with government. government has to provide without interruption the protective services which are government's reason for being. >> it is not surprising public unions ally with democrats as providence rhode island fire department union president paul dowdy. >> if you look just generally at the republican party. they believe in a smaller government. as a government worker i don't know necessarily agree with
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that. >> by the 2* 2008 election, a former community organizer with long ties to one of the largest government employee unions of all -- >> i spent my entire adult life working with sciu. >> a financial crisis would catapult their man to the white house. but it would also bring those dire warnings about public sector unions from fdr's era. >> union. >> yes! >> back into focus. >> and one other thing, bret. in 2009, public employee unions absolutelily eclipsed the membership of private sector unions. >> thanks a lot. we will see you a bit late. up next, i go across the country to one of those [ male announcer ] it's a golden opportunity... to experience the lexus performance line... including the gs
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you have heard why many fear public sector unions could bankrupt cities and states. it is happening right now in california. let's take a trip down route 66. ♪ get your kicks on route 66 >> on old route 66, san bernardino was known as the last stop before l.a. ♪ san bernardino >> with freeways and major railway station it was the ideal hub linking the ports of los angeles and long beach out to the rest of the country. san bernardino symbolized the promise that economic growth held for middle class america. it was even the location of the first mcdonald's. but today, this city of around 210,000 has a shortfall of
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$46 million. over a quarter of its entire budget. unable to fund enough cuts to close the gap, san bernardino on august 1 filed for bankruptcy. >> you called this a stain on the city? >> oh, yes. >> patrick morris has been mayor of san bernardino since 2006. >> how did sweard ge san bernat into the predict ament? >> it was a perfect storm economically when this hit in 2006 and 2007 the bottom fell out. >> in the perfect storm, morris says san bernardino property values dropped by 65%. seven car dealerships shuttered and the city lost tens of millions of dollars of sales, income tax and tax receipts. >> we have major cash flow issues. >> he names a great recession. every city in california has been through the great recession. >> republican state assemblyman
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mike mor morrell rejects morri' perfect storm analogy at least that a sear reof factors came together to devastate the city. >> they had five years of warning that this train was coming down the track. >> that is morell's preferred metaphor. a freight train fueled by public employees salaries and benefits and it hit town right on schedule. >> approximately 75% of the budget goes towards fire and police officers. they are not going to be able to pay those pensions nor are the salaries they have been paying. >> we have historically in the city been remarkably generous with our labor contracts. >> generous, indeed. in 2010, a san bernardino $317,000rgeant maided 3 h in a city where the average household income is less than
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$40,000. but it is not just the top salaries that have brought down san bernardino. it is the average ones. >> san bernardino firefighters are making about $130,000 a year. police around $95,000. with pretty generous pensions as well. >> did anybody say hey, you know what, we are not going to be able to afford this down the road? >> those are very problematic agreements that were made at a time when life looked rosy. >> morris admits it has been in good times and bad that san bernardino's public unions had powerful influence over the politicians. the politicians they help elect. morris says that is just the way its. >> in a blue collar city as old as we are unions have a presence in terms of funding for candidates for are city council and they are present at the table during labor negotiations. >> those negotiations in some cases have bound san bernardino
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to pay employees just as much even after they retire. >> that is not going to work. it is not going to work. >> you cannot retire people at the age of 50 years with literally full pay and bridge their health benefits until medicare. >> the salaries and benefits you are saying have to be renegotiated. >> you bet. >> why has that not happened yet? >> it will happen under the guidance of chapter 9. >> in other words, bankruptcy court. but public is sector unions are saying not so fast. they point to state precedence that suggests their pensions are are untouchable. however, morris, a former judge believes that in this unprecedented crisis the courts will allow cities to it modify at least some of their contracts. meanwhile, he is dealing with the day-to-day trials of a city gone belly up. >> now, you don't really have any credit. >> that's right. >> cash for things. >> carry.d kari.
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>> you vendors who leased equipment who may way to to take that equipment back. >> yes. >> and that is a daily thing? >> we deal with it daily. >> bankruptcy in the short-term is the easier thing to do but the long-term you affect lending condition, housing conditions and jobs. >> and that morrell says will make things worse for the already beleaguered citizens of san bernardino. >> were there other options? >> there always options. the city could have balanced the budget with a massive cut of services. when you are looking at a city that already cut 20% of its staff that is a really difficult choice to make. >> san bernardino's modernistic dark glass city hall completed in 1972 was once a sign this town was look to the future. today, however, the last stop on route 66 may be on its last legs. >> coming up, the biggest local
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government bankrupt icy in u.s. history. and it is not in california. and it is not in california. after the break. orgdoes your cauliflowernic have a big carbon footprint? not at all. that's great. melons!!! oh yeah!! well that was uncalled for. uhh... mr. gallagher. incoming!!! hahaha! it's wasteful. you know jimmy. folks who save hundreds of dollars switching to geico sure are happy.
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>> this is a fox news alert. in new york, breaking news from the campaign trail we have been following. republican presidential hopeful, mitt romney will name wisconsin congressman paul ryan as his runningmates. fox news is confirming, mr. romney will make his announcement, tomorrow morning at 8:45 a.m. from norfolk, virginia. a republican source says that paul ryan is his pick. they will appear tomorrow before a four-state bus tour. political insiders says ryan, a seven-term congressman could fire up the conservative base. he is the chairman of the house budget committee, which in march, romney praised the ryan
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budget, describing it as marvelous. breaking news from the campaign trail. mitt romney making his vice-presidential runningmate announcement tomorrow morning, 8:45. now, the biggest local government bankruptcy of all. $4 billion. it took some doing. greed, income p incompetentencd ol >> bank run to the tune of 4 billion. >> what words would you use to describe the financial situation in jefferson county? >> hopeless. at this junk fuhr. >> hopeless? >> hopeless. >> jimmy stevens is jefferson county's district three commissioner. he was elected after the crisis
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began. >> how did it stop to go after the rails? >> they attempted to build a cadillac when a chevrolet would have worked as well. >> this is not a tale about cars but sewers and the sort of mess that seens to the surface when local politicians with big ideas get mixed up with wall street bankers looking for big fees. a financial sinkhole in a swamp of corruption. it begins back in 1996. jefferson's sewer system was leaking raw sewage into rivers and streams and the county signed a federal consent decree to fix the problem. the costs huge, estimated at between $250 million and about a billion dollars. >> where did the county get the money to undertake such a massive project like this? >> if went to investment bankers, went to the bond market and made their pitch and it was underwritten and sold as a good investment. >> at this facility alone the county spent more than $200 million on improvements and repairs earning jefferson
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county the nickname of having the taj mahal of sewer systems. >> i think in a lot of ways this facility is emblematic of the problems the system has. >> david denar has been in charge of running the jefferson county sewer system since 2008. >> the building we are in now what does it do? >> this is a peak flow pump station. >> it was built in 2004. soon thereafter problems began. >> we had to spend $35 million in repairs. >> what did the building cost originally. >> 50 million. >> and had to spend $30 million to repear it? >> to put it in regular operating condition, yeah. >> when did go wrong there? >> the people did not operate on a budget and used local engineers to manage a problem that required a lot more expertise than was here. >> some of the sewers green lighted were not even included in the consent decree. how did that happen? >> jefferson county won'ted to
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bore are a super sewer underneath to get to area that would be developed. when they got to the point the outcry from environmental or rate payer groups was so loud they killed the project outright, leaving jefferson county with the tunnel to no where. when it became clear the county wouldn't be able to make the payments on its bonds officials went back to wall street looking to refinance. >> original debt service represented $2.4 billion. 98% of that was fixed debt and investment bankers said we can go to a variable rate interest and add derivatives to that to synthetically make that lower. >> the new instruments that wall street had generated were so complicated that the average person even the finance person could not understand it. >> tony patellas is the jefferson county manager. he said those instruments
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exploded jefferson county's debt without any one realizing. >> it we were overextended by 85% and the folks that insured our bonds should have known better. >> when the market crashed in 2008 jefferson's bonds dropped to junk, allowing lenders to demand payment in full. >> they called everything in and we were unable to pay. today, jefferson county is debt over $4 billion. we are in bankruptcy. the largest bankruptcy in the history of a local government in the united states. >> did wall street really take jefferson county for a ride here? >> i leave they did. >> a federal criminal investigation of the sewer deal found that was the case. but wall street got a number of help from a number of people with their hands out. >> we had 21 people that either plead guilty or went to prison. commissioners, employees and contractors. >> that included former commissioner and birmingham mayor larry langford. sentenced to 15 years for accepting thousands of dollars in cash and gifts from one of the bankers.
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former commissioner gary white. ten years for accepting bribes from an engineering company that worked on the sewer lines. mary buckaloo probangs after lying to the grand jury. chris mcnair serving five years for bribery and conspiracy to solicit bonds. bond underwriter jp morgan settled with the sec, paying the county $25 million and the sec and a. the bank alleged to have bribed friends of jefferson county commissioners. >> there was definitely malfeasance in the whole use of the swaps et cetera. >> but the president and ceo of assured guarantee which reinsured. so sewer bonds says the sins of wall street and corrupt politicians shouldn't let jefferson county off the hook. >> i didn't vote for that project, they did. >> what really steams federico
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is that they killed a deal that would have avoided bankruptcy. bond holders offered to forgive a billion dollars of the sewer debt if state lawmakers allowed the county to raise taxes to pay the rest. now, assured guarantee has to pay up. we should work together. >> at a certain point when you can't meet your financial obligations and the settlement that we had was getting farther he away instead of closer to us we had no choice. >> is it a cautionary tale for other counties across the country? >> absolutely is. you have got to live within your means. >> welcome back. lou dobbs from the fox business network. the president of assured guarantee said his company was going to be able to be fine even in the current environment. if there was a lot of defaults would it be like a domino effect in a a worst case scenario?
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>> if it reached co con tagion levels that would be a l calamity. >> how bad could a municipal bankruptcy be for the people who live there? who live there? worse than you c [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide.
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if your town had out of control debt could that truly affect your life? you wouldn't ask if you spent some time in stockton, california, like dan springer did. spend a night on the tough streets of stockton and you really sense the stakes for the city. >> do me a favor. just take your hands out of your pockets for me. >> and the people that live here. pretty much life and death. >> if the officers disappear the gang bangers will be here in a heart beat. >> since 2010 the city has had to slash a quarter of its police force because they borrowed more than it can pay and promised more to unions than it can deliver. police can't respond to all 911 calls and that meant more crime. serious crime. >> we have seen a spike in the violent crime and in the homicides.
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>> stockton is falling apart. it is a horrible thing to see. >> fred siegel of the manhattan institute has written extensively about cities like stockton going broke. >> stockton is a city in the midst of terrible social breakdown. not justice cal collapse but social collapse and the two are intertwine. >> stockton in the middle of the fertile farmland of california's central valley. also an inland seaport connected to san francisco bay. a navy base here anchored a bluent 20th century blew collar economy. but by the 1990s, the base and many of the factories were gone. stockton's signature waterfront had become a place to avoid. an johnson was on the city council then. >> the council and mayor at the time said we need to fix this problem in the heart of our city. >> with taxpayers' money and a seemingly limitless ability to
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issue municipal bonds stockton tried to spend its way back to prosperity. >> it was going to be remade and part of the greater bay area. >> $24 million for a minor league baseball park. $150 million for an 11,000 see the arena. 30,000 per slip for a yacht marina next door to new million dollars town homes. >> risky and expensive projects but at the same time your city employees were getting extremely generous packages in pay and in benefits. why didn't anybody put up their hand and say wait a minute, this is insanity. >> there was a failure in leadership. they felt that the money would continue to roll in and property values would continue to rise. >> and then in 2008, the stock market crashed. real estate prices plunged. the city was suffering double digit unemployment at the same time property and sales revenue went off a cliff.
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when the city moved to reduce staffs and trim salary, benefit and pension packages the police union not only resisted. it launched an ad campaign that johnston look as a little short of a threat. >> they put up billboards which said welcome to the most dangerous city in california stop laying off cops. >> we wanted something to grab their attention. >> bill huddle is the vice president of the president union. >> what about the blood splatter running tally. >> to let everyone know this would cause more crime and havoc and violence in the city. >> totally irresponsible and totally bullying. when you don't have the money you don't have the money. >> last february, stockton defaulted on $32 million in bonds. it declared bankruptcy. the biggest u.s. city to do so. meanwhile. >> we have is to stay locked up. >> folks we spoke to sense that for them life in stockton was likely to get worse. >> when we return, fixing a city that is broke.
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this hour we have told you about cities bankrupted and lives shattered by folly, greed and corruption. can any one turn the towns around? meet two democratic mayors trying and aair rently making progress. even cutting union pensions and benefits. >> the private sector is doing fine. where we are seeing weaknesses in the economy have to do with state and local government. >> both parties worry about cities going broke. but they seldom agree on how to fix the problem. >> because i'm sure that the president of the united states is not getting his talking
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points from the big government union bosses in washington. >> now, torn between the party most powerful supporters the realities of the city budgets. >> they are bumping up against liberal interest. not enough money for basic services and roads. >> that is the case in san jose, california whose democratic mayor are chuck reid took office in 2007. >> what role did the public sector unions and their contracts really play in your fiscal crisis? >> most of our costs were driven by increasing salaries and pension benefit and those came out of the '90s in the go-go years when we had money. >> the average cost for a police officer and firefighters was $200,000. >> a year. >> what steps did you take to
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stop the bleeding. >> we cut everybody's pay by 10% starting with me all the way down to it all of the unions. everybody took a 10% pay cut. >> he cut city services, too. but that still left a $115 million deficit. it was time for a desperate measure. or as it became known, measure b. >> what exactly was that? >> measure b was a ballot when slur to' lou the voters to decide whether or not we are going to ten to cut services or bring down the cost of pensions. >> it would save the city billions over time but voters had to approve it first. that was hardly a slam dunk in a county that vot voted 70% for obama in 2008. reed pushed his case hard, demonizing city workers says firefighter robert s api en. >> trying to convince the public things were bad in the city because of employees.
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in some cases people have been accosted in grocery stores. >> from the firefighters and police officers perspective have you heard the stories they have been verbally abused and treated with scorn? >> there have been some instances of that but the facts are difficult and the facts are we have cut services over and over and over again to fund very expensive retirement benefits. >> last june despite strong union opposition, 70% of san jose voters, the same number that supported president obama in '08 vote the for measure b. reed got his victory the same day scott walker easily is survived a union led recall challenge. but the san jose democrat bristles at the comparison. >> lots of people tried to draw the parallel with san jose and wisconsin. it is not a good analcy. >> analogy. >> he says he wants to force the union to accept cuts while
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walker curtailed some of their bargaining rights. >> in san jose we negotiated with the unions hundreds of hours and they are are still an important part of what we have to deal with. >> in providence, rhode island, mayor tavares feels the same way. he took office in 2012. >> i came into office expecting the deficit just not one of the magnitude we found. >> he acted quickly, notifying all 1934 providence teachers they could lose their jobs come summer. eventually he struck an agreement with the teachers' union that saved almost all of their jobs. and tens of millions of dollars. >> good to see you. >> nice to see you. >> he then approached the police and fire unions and got them to it agree to big cuts as well. >> he said i need your help. i can't do that without you. >> paul dowdy is president of the providence firefighters. >> if you have any solutions that you think will help please i'm open to them. i will do almost anything and
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that was over a sandwich. >> the unions knew they had to deal with tavares says nicole gelinas. >> they said if we don't vote for this we may get a lot worse if the city goes bankrupt. we would rather give back a little now than a bit later. >> the unions have not yet come around to that way of think back in san jose. >> no part of measure b will be implement. >> instead, firefighters and police sued claiming measure b is unconstitutional. reed is standing firm. >> what is the one thing that keeps you up at night. >> the long-term fiscal impacts of these problems. spend the money if you have it. if you don't have it, don't spend it. >> we began this hour from this spot because wall street is the center of modern finance. but we end here on a different thought. behind me is federal hall. that is where our national government first met after the constitution was is ratified.
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one of the framers gravest concerns is that the nation could be profoundly weakened if debts run up by the states were not handled in a responsible way. not everyone agreed about what to do then and, yes, the issues are different today but two core ideas of the founders still apply. first, out of control debt can destroy is country's ability to chart its own destiny. second and even more crucial, in crisis the exceptional character of the american people is the most important asset we possess. that is our program. i'm bret baier. i'm bret baier. thanks for check out the bass pro shops fall hunting classic for amazing doorbuster deals - plus extra savings up to $100 during our scope trade-in sale. why let constipation stry miralax.?
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mr. romney will make his announcement at 8:45 at norfolk, virginia. a republican official has been quoted with knowledge of the development. fox news has not been able to independently confirm that ryan is romney's runningmate. the duo will appear together before launching a four-state bus tour. seven-term congressman from wisconsin could fire up the conservative base.
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